EMUM CAPITAL SDN BHD v 1. ) GREAT CONCRETE SDN BHD 2. ) TEH KHYE CHIN 3. ) ANANDARAO A/L ATCHANNAH

Case Significance

Illustrates combining Order 14 summary judgment with an Order 18 rule 19 strike-out in a trade-credit dispute, holding that lawful reporting of a customer's default is not actionable and does not create a triable counterclaim.

This High Court decision at Kuala Lumpur, in the Commercial Division, resolves two applications by a supplier of building materials against a customer and its guarantors: an application for summary judgment under Order 14 of the Rules of Court 2012 and an application under Order 18 rule 19 to strike out the defendants' counterclaim. The plaintiff had granted the first defendant a credit facility on the terms of a credit facility application form, under which the customer's directors declared that all debts would be settled within the credit term from the date of each delivery of goods and that interest of 1.5% per month would run on overdue amounts, with the individual defendants standing as guarantors.

On the summary-judgment application, the defendants advanced a series of arguments to show triable issues, including that the plaintiff had itself breached the credit terms by suspending the facility, that the credit terms had been waived by conduct, that the late-interest charges were not contractually enforceable, that discrepancies in delivery orders affected liability, and that the guarantee letter was invalid. The court also had regard to the account-stated principle, under which a failure to query statements of account rendered can support the debt. It found that the defences did not raise genuine triable issues and that the plaintiff had established its claim, so that summary judgment was appropriate.

On the strike-out application, the court examined the defendants' counterclaim, part of which alleged wrongful conduct by the plaintiff in reporting the defendants' default. It held that the plaintiff's reporting of the default was a lawful exercise of its contractual rights, and that any adverse effect on the defendants' ability to obtain credit flowed from their own failure to pay rather than from any wrongdoing by the plaintiff. Finding the counterclaim obviously unsustainable and an apparent attempt to confound the main action and delay payment, the court allowed both applications, entering summary judgment for the plaintiff and striking out the counterclaim under Order 18 rule 19. The judgment is a useful illustration of combining summary judgment with the striking out of an unsustainable counterclaim in a trade-credit dispute.